Gordhan lashes out at critics
Finance Minister Pravin Gordhan criticises DA for using wage subsidy as ‘political football’.
|||Finance Minister Pravin Gordhan has lashed out at opposition parties for turning the youth wage subsidy and the e-tolling into “political tools”.
Speaking during his annual budget vote debate in Parliament on Friday Gordhan accused the DA of being “bankrupt on economic policy” for focusing on politically hot issues while proposing “no solutions” to the country’s social and economic challenges.
“Don’t just pick on the youth wage subsidy as a convenient political tool. Don’t use it as a tool… What we really have (here) is politicking in this debate, where we conveniently look at Cosatu as the bogey organisation and start looking at manufacturing all sorts of things in order to generate political debate,” he said.
Gordhan was responding to criticism – particularly from the DA – over the government’s apparent inability to move ahead with the youth wage subsidy – for which R5 billion was set aside in the 2012 Budget – in the face of opposition from ANC alliance partner Cosatu.
DA MP Tim Harris said while former finance minister Trevor Manuel had had some of his policy ideas impeded, but got his way nine times out of 10, the current minister’s policies were being “politically railroaded by a rampant Cosatu”.
“It is a national tragedy that Cosatu’s cosy political arrangement with the ANC has torpedoed the one plan to tackle youth unemployment from national treasury that has broad support from the entire opposition, economists across the ideological spectrum and from South Africa’s second-largest trade union federation, Fedusa,” said Harris.
The wage subsidy issue exploded on to the streets of Johannesburg on Tuesday, when an apparently unsanctioned gathering of Cosatu members clashed violently with a legal march by DA supporters aimed at highlighting Cosatu’s opposition to a wage subsidy.
Referring to similar criticism over e-tolling, a visibly irritated Gordhan said: “Suddenly the truth doesn’t matter. What matters is how you score political points. What matters is how you smear coats of paint around corruption and all sorts of things in order to discredit something and opportunistically use a R20bn project as a political football.”
Gordhan suggested that instead of harping on the wage subsidy, the DA should instead help find solutions to the “real issues”, such as the fact that SA was facing a “one in 70 years recession”.
“The real issue in South Africa is: did we as the government manage our fiscus correctly in response to the recession? The answer is yes. Do we have a strategy for growth and inequality in the context of the recovery – not only from recession, but from 300 years of apartheid and colonialism. You (the DA) don’t have an answer (to these issues),” he said.
And responding to criticism over the government’s decision to challenge a court ruling which led to the temporary suspension of e-tolling in Gauteng, Gordhan said the state had every right – indeed the duty – to test “certain crucial legal issues” in court.
He also said the country faced “dangerous times” arising from “both the dismal situation in Europe and our own structure of economy and society”. - Saturday Star
JPMorgan changes risk model
The move, which allowed the bank to disguise the level of risk that the CIO was taking in its trading, could become a major focal point of investigations.
|||JPMorgan Chase & Co's decision to radically change the way risk was measured in its Chief Investment Office is likely to dog the bank in the developing crisis over the big trading losses it has suffered.
The move, which allowed the bank to disguise the level of risk that the CIO was taking in its trading, could become a major focal point of investigations by the US Securities and Exchange Commission and the FBI, for mer regulators said. It also will likely become part of investor cases in lawsuits against the bank and its executives.
When JPMorgan Chief Executive Jamie Dimon announced on May 10 that the company had lost at least $2 billion through “egregious mistakes” in trading, he also said for the first time that the bank had changed its model for measuring so-called value-at-risk in the CIO where the derivatives portfolio was managed.
The change made the CIO's portfolio, which totalled about $375 billion, appear to be a lot safer than it actually was and gave traders more leeway to make risky bets. The rest of the bank's divisions ap parently kept to more conservative modeling.
The old model would have sounded alarms by showing that the CIO could lose $129 million, or more, in a day during the first quarter - a higher reading than during the financial crisis.
But the new model cut that figure almost in half, to $67 million, clouding the view inside and outside the bank of the danger it faced. That figure was lower than the $69 million reading at the end of the prior quarter.
So far, Dimon has not revealed exactly when the model was changed, or why.
Those questions now appear certain to be at the centre of regulatory and shareholder inquiries into the losses, which are expected to grow. Some traders and analysts at other firms estimate the final loss tally could exceed $5 billion as the bank tries to unwind its positions. Dimon has said the losses could total $3 billion or more.
Investors have dumped JPMorgan's shares since the loss was announced, pushing them down more than 17 percent and erasing more than $27 billion of market value. Two shareholder lawsuits were filed against the company on Wednesday, accusing the bank and its management of taking excessive risk.
The SEC is investigating what happened at JPMorgan, the White House has confirmed. The FBI has also opened a preliminary investigation, according to agency director Robert Mueller.
A JPMorgan spokesman declined to comment. Spokesmen for the SEC and FBI declined to comment.
“It is logical to expect that the SEC will look at this issue” of the disclosures, as well as why and how the new model was adopted, said Harvey Pitt, a former SEC chairman.
“Regulators are going to want to know if changes were made consistently with the obligation to operate safely and soundly,” said Pitt, who is currently CEO of Kalorama Partners, a business consulting firm.
An initial report on the bank's results for the first quarter, made April 13, disclosed the $67 million figure, the reading under the new risk model. It did not say that there had been a change in models.
On May 10, as it explained the losses, the bank showed the $129 million risk reading from the old model. On a call with analysts that day, Dimon said the bank had tried the new model, and then reverted to the old one, which it had used for several years.
“There are constant changes and updates to models - always trying to get them better than they were before,” Dimon said in the May 10 conference call. “That is an ongoing procedure.”
That explanation, “does not pass the smell test,” said Mike Mayo, analyst at investment firm CLSA. “It is a red flag for them to change the model,” said Mayo, author of “Exile on Wall Street,” about the inner workings of big banks.
Banks sometimes refine their value-at-risk, or VaR, models but those commonplace changes do not by themselves produce such dramatically different results, said Christopher Finger, one of the founders of RiskMetrics Group, which pioneered VaR models and is now a unit of MSCI Inc.
The model JPMorgan put back in place shows “a huge, huge increase in risk,” Finger said.
Finding out how the company decided to change the model would reveal a lot about its internal controls and about how the traders apparently got the upper hand over risk managers, said Finger.
Risk controls on traders in the CIO were eased last year without Dimon knowing, the Wall Street Journal reported on Friday, citing unidentified sources.
Traditional value-at-risk models are not a perfect predictor - for example, they only estimate the possible losses for most days, losses could be even bigger on a few occasions. But even so, they are widely used as a metric by risk managers, traders, and investors.
Changes in such risk models usually require several layers of approval going up the management ladder, said a risk manager at a large financial company, who declined to be identified.
Mayo said it is important for investors to know who at JPMorgan made the decisions and exactly when, so they can gauge if the loss is the result of bigger problems at the bank.
“I have yet to hear an answer that makes a lot of sense,” he said. The lack of transparency makes him wonder: “What else is falling through the cracks?” - Reuters
Obama weighs in on Euro economic crisis
Leaders of the world's most powerful nations are to focus their attention on Europe's economic woes.
|||Camp David - Leaders of the world's most powerful nations were to focus their attention on Europe's economic woes on Saturday after President Barack Obama threw his weight behind French calls for more pro-growth policies.
Obama set the stage for a fractious G8 summit here by forging an alliance with new French President Francois Hollande over the need to jolt Europe back to growth.
Fearing Europe's economic crisis is poised to worsen - with dangerous repercussions for the US economy and perhaps his chances of re-election - Obama weighed in, risking the ire of German Chancellor Angela Merkel who has championed an austerity-first approach.
Shortly before welcoming Merkel and other leaders to the famed presidential retreat outside Washington, Obama noted Friday that events in Europe held “extraordinary” importance for the United States.
The G8 needs to discuss “a responsible approach to fiscal consolidation that is coupled with a strong growth agenda,” he said.
To kick-off the summit a tie-free Obama greeted leaders shortly after dusk Friday at the threshold of his wood cabin for an informal dinner that lasted more than two hours.
But the dressed-down atmosphere did little to relieve tensions, which have been stoked by the belief that two years of painful cuts demanded by Germany and others have undercut Greek growth and made recovery more difficult.
In what may have been a telling moment, Obama greeted Merkel at his Laurel Lodge with a cordial: “How've you been?” When her response came: a shrug and pursed lips, Obama conceded: “Well, you have a few things on your mind.”
Publicly European leaders have attempted to smooth over the splits within the G8, insisting austerity and stimulus need not be mutually exclusive.
“We need to take action for growth while staying the course in terms of putting our public finances in order. Stability and growth go together, they are two sides of the same coin,” European Commission chief Jose Manuel Barroso said ahead of the summit.
But with Greece's fiscal crisis apparently approaching denouement, those good words may be sorely tested.
The recent clobbering of Greek parties that back austerity measures under the country's 173-billion-euro ($220 billion) bailout has sparked a fresh round of market panic and left the two-year-old effort to prevent a Greek default on life support.
Fresh Greek polls are scheduled for June 17, but there is no certainty that supporters of the painful reforms will win, and already nervous Greeks have been pulling money from bank accounts.
The markets are already betting that if anti-austerity parties win the rest of Europe will turn off the bailout spigot, a decision that would force a Greek default and would likely spell an exit from the eurozone.
So far, European leaders are insisting that Greece must meet its commitments, a stance that will likely be held until the elections. But a row is brewing over whether Greece's bailout package needs to be revisited.
Two years of austerity have resulted in crippling unemployment and while Greeks say they are overwhelmingly in favour of staying in the eurozone, there is little appetite for more budget cuts.
Diplomats say major new initiatives are unlikely to come from the G8 summit, but Obama's intervention tips Europe's political calculus toward pro-growth policies before European officials gather in the coming weeks to thrash out concrete measures.
Commission president Barroso said there was growing consensus around the idea of specific investments funded by common European bonds Ä a measure he said would satisfy the need for austerity and stimulus.
“We need to compliment the fiscal consolidation efforts for reforms with investment,” he told AFP on the margins of the summit.
G8 leaders will hold their main discussions on Europe's fiscal plight Saturday at Camp David's rustic collection of cabins in the wooded Catoctin Mountains in Maryland, outside Washington.
Friday night's dinner discussions focused heavily the ongoing bloodshed in Syria and Iran's contested nuclear program ahead of talks between global powers and the Islamic Republic in Baghdad later this month.
According to a senior US official there was broad agreement on the need for political transition in Syria, where a revolt and government crack down has left 12,000 dead.
But as UN weighs sending more military observers to the country, it was not clear whether Russia and the rest of the G8 had bridged differences over the fate of Bashar al-Assad's regime.
There was also discussion about North Korea, which is feared will launch a new nuclear test and Myanmar, after Obama eased US investment restrictions Thursday.
Diplomats said the weekend would also see an agreement on how to help newly free Arab nations recover state assets moved abroad by members of previous regimes.
The G8 club of developed nations includes Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. - Sapa-AFP
Facebook stock finishes flat in debut
Facebook's IPO, it turns out, wasn't as big a deal as expected.
|||New York - In the hours before Facebook's stock began trading on the Nasdaq Stock Market for the first time, CEO Mark Zuckerberg reminded the company's 3,500 employees not to get caught up in the hoopla surrounding its long-awaited initial public offering.
“Right now this all seems like a big deal,” Zuckerberg said before he pushed a button that rang Nasdaq's opening bell from company headquarters at 1 Hacker Way in Menlo Park, California. “Going public is an important milestone in our history. But here's the thing, our mission isn't to be a public company. Our mission is to make the world more open and connected.”
Facebook's IPO, it turns out, wasn't as big a deal as expected.
One of the most anticipated IPOs in Wall Street history ended on a flat note Friday, with Facebook's stock closing at $38.23, up 23 cents from Thursday night's pricing.
That means the company founded in 2004 in a Harvard dorm room has a market value of about $105 billion, more than Amazon.com, McDonald's and Silicon Valley icons Hewlett-Packard and Cisco.
It also gave 28-year-old Zuckerberg a stake worth $19,252,698,725.50.
But for many seeking a big first-day pop in Facebook's share price, the increase of six-tenths of one percent was a letdown.
“This is like kissing your sister,” said John Fitzgibbon, founder of IPO Scoop, a research firm. “With all the drumbeats and hype, I don't think there'll be barroom bragging tonight.”
Added Nick Einhorn, an analyst with IPO advisory firm Renaissance Capital: “It wasn't quite as exciting as it could have been. But I don't think we should view it as a failure.”
Indeed, the small jump in price could be seen as an indication that Facebook and the investment banks that arranged the IPO priced the stock in an appropriate range.
It was also good for ordinary investors, who are mostly shut out from the IPO price and have to buy the stock in the open market on day one. They got a chance to buy all day at a price not much above $38.
And it was good for early investors in the company, who owned more than half the 421 million shares made available in the IPO. Had the stock shot to $60 Friday morning, those early investors would have felt they hadn't gotten enough money for their stakes.
The 421 million shares that were sold fetched $16 billion and represented 15 percent of the company's stock. Facebook got $7 billion, and the early investors $9 billion. The other 85 percent of Facebook's stock is owned by Zuckerberg and other Facebook executives, employees and early investors. In comparison, Google offered just 7.2 percent of its stock when it went public in 2004. Its stock rose 18 percent on day one.
Here was Facebook's “timeline” Friday, trading under the symbol “FB” on the Nasdaq Stock Market:
The stock opened at 11:30 a.m. at $42.05, but soon dipped to $38.01. It briefly traded as high as $45 and by noon was at $40.40. It fluttered throughout the afternoon and hugged the $38 mark for much of the final hour, before closing at $38.23.
By the end of the day, about 570 million shares had changed hands, a huge trading volume for any company.
TD Ameritrade reported that in the first 45 minutes of trading, Facebook accounted for a record 24 percent of trades executed by its customers.
By comparison, on its first day back on the stock market, in November 2010, General Motors represented 7 percent of trades on the online brokerage.
Steve Quirk, who oversees trading strategy at TD Ameritrade, said that about 60,000 orders were lined up before Facebook opened.
Technical glitches delayed the start of Facebook's trading by a half-hour. The Securities and Exchange Commission also is investigating problems traders encountered in changing and canceling their orders.
Other social media companies, most of which have gone public in the last year, saw their shares plummet when it became clear what kind of reception Facebook was getting in the public market. Shares of game-maker Zynga Inc. and reviews site Yelp Inc. both hit all-time lows.
The stock market will now begin assigning a dollar value to Facebook based primarily on its financial performance. If Facebook can continue to increase its revenue and profit at the rate it has the past few years, the stock should rise. Google reported strong earnings after it became a public company, and its stock price more than tripled the first year, from $85 to $280.
Facebook's stock price will also depend somewhat on broad economic forces, as well as the whims of investors.
Facebook is one of those rare companies whose IPO transcends Wall Street's money lust. Since its start as a scrappy network for college students, Facebook has come to define social networking by getting its 900 million users around the world to share everything from photos of their pets to their deepest thoughts.
Most tech companies going public want a big rise in their debut to show they're “strong, dynamic companies standing out in the crowd,” said Francis Gaskins, president of researcher IPOdesktop, but Facebook already has that image, and so may not care.
Few of the Internet companies to go public recently have been profitable. But Facebook had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In 2011, it earned $1 billion on revenue of $3.7 billion, up from earnings of $606 million and revenue of $2 billion a year earlier.
That's a far cry from 2007, when it posted a net loss of $138 million and had revenue of $153 million. The company makes most of its money from advertising. It also takes a cut from the money people spend on virtual items in Facebook games such as “FarmVille.”
Facebook's public debut marked a milestone in the history of the Internet. In 1995, Netscape Communications' IPO gave people their first chance to invest in a company whose graphical Web browser made the Internet more engaging and easier to navigate. Its hotly anticipated IPO lit the fuse that ignited the dot-com boom. That explosion of entrepreneurial activity and investment culminated five years later in a devastating bust that obliterated the notion that the Internet had hatched a “new economy.”
It took Google Inc.'s IPO in 2004 to prove that an Internet company with a revolutionary idea could be profitable. In the process, the Internet search leader is forcing other industries to adapt to a new order where people have come to expect to be able to find just about anything they want by entering a few words into a box on any device with an Internet connection.
Facebook's IPO almost certainly will enrich other up-and-coming entrepreneurs as Zuckerberg uses the company's cash and stock to buy other startups in an effort to bring in other talented engineers and promising technology. That's what Google has been doing for years. Since it went public in 2004, Google has spent $10.2 billion buying nearly 200 other companies. Those figures don't include Google's pending $12.5 billion acquisition of cellphone maker Motorola Mobility Holdings Inc., which is still awaiting regulatory approval in China.
Zuckerberg's biggest deal so far came when he agreed to buy Instagram, a maker of a popular mobile app for photos, for $1 billion in April. Because most of the deal is being paid for in stock, Instagram is already getting richer. Based on Facebook's current share price, Instagram is in line to receive about $1.2 billion.
Friday's debut, though, resulted in deals worth much less.
Alper Aydinoglu, a DePaul University student who got 50 shares via Etrade at $38, said he was “disappointed with the first day of trading.”
His gain on paper: $11.50, but that was before Etrade's standard commission of $9.99.
Aydinoglu still called it an excellent learning opportunity.
“On top of everything, I now have the bragging rights that I participated in one of the most popular IPOs of all time.” - Sapa-AP
AP Technology Writers Michael Liedtke in San Francisco and Peter Svensson in New York, Associated Press Writer Marcus Wohlsen in Menlo Park, Calif., and AP Business Writers Bernard Condon, Pallavi Gogoi and Joseph Pisani in New York contributed to this story.
Europe thinks the unthinkable on Greece
European officials are working on contingency plans in case Greece bombs out of the euro zone, the EU's trade commissioner said on Friday, while Berlin said it was prepared for all eventualities.
|||European officials are working on contingency plans in case Greece bombs out of the euro zone, the EU's trade commissioner said on Friday, while Berlin said it was prepared for all eventualities.
European shares were on course for their steepest weekly decline since November and are now in the red for the year, spooked by the prospect of a Greek euro exit sparking a wave of contagion in the currency bloc which could engulf much larger economies such as Spain's.
Policymakers insist they want Greece to remain in the euro zone but European Union trade commissioner Karel De Gucht said the European Commission and the European Central Bank were working on scenarios in case it has to leave.
“A year and a half ago there maybe was a risk of a domino effect,” De Gucht told Belgium's Dutch-language newspaper De Standaard, in comments confirmed by a person close to him.
“But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn't make it. A Greek exit does not mean the end of the euro, as some claim.”
Speculation about such planning has been rife, but de Gucht's comments appeared to be the first time an EU official has acknowledged the existence of contingencies being drawn up.
A German finance ministry spokeswoman, asked about plans for a possible Greek exit, said, without elaborating: “The German government naturally has the responsibility to its citizens to be prepared for any eventuality.”
But a spokesman for the European Commission, the EU's executive, said there was no active planning.
“(The) European Commission denies firmly (that it) is working on an exit scenario for Greece,” Oliver Bailly said. “(The) Commission wants Greece to remain in the euro area.”
World shares slid and German borrowing costs hit record lows as uncertainty about Greece's future in the euro zone and a deepening Spanish banking crisis bolstered safe-haven assets.
Investors were rattled by a ratings downgrade of 16 Spanish banks by Moody's Investors Service, although the move had been expected.
Sentiment has soured to such an extent that an opinion poll showing Greeks are returning to establishment parties which support the country's bailout had little impact.
If they vote that way in June 17 elections, Greece's place in the euro zone would look more secure and the threat of contagion engulfing countries such as Spain would diminish.
The poll, the first conducted since talks to form a government collapsed and a new election was called, showed the conservative New Democracy party in first place, several points ahead of the radical leftist SYRIZA which has pledged to tear up its 130 billion euros bailout programme.
“It's up to Greek politicians to explain the reality to their people and not make false promises,” German Finance Minister Wolfgang Schaeuble, one of Greece's harsher critics, told France's Europe 1 radio.
“We want Greece to stay in the euro but meet its commitments and that's a decision that's up to the Greeks,” said Schaeuble, predicting that financial market turmoil fuelled by the euro zone debt crisis would calm in a year or two.
SPANISH LOSSES
The biggest fear for European leaders is that a Greek meltdown, which would surely follow the stoppage of its bailout funds, triggers a domino effect among the currency bloc's weaker members.
Even aside from the contagion threat, they have huge problems of their own.
Spanish banks' bad loans rose in March to their highest level in 18 years, figures from the Bank of Spain showed on Friday, underscoring the problems facing the government as it attempts to clean up the sector.
The Bank of Spain said bad loans rose to 8.37 percent of the banks' outstanding loans, the highest since August 1994 and up from 8.3 percent in February.
Banks beset by bad property loans which could deteriorate further, along with overspending in indebted regions, are the two biggest risks for Spain's public finances.
Investors believe Spain needs to aggressively address these two issues to avoid a bailout and pushed Spanish borrowing costs to euro-era highs this week.
The fact the euro zone crisis is moving back into an acute phase will place it centre stage at a weekend summit of leaders of the G8 top industrialised nations.
President Barack Obama, the G8 host, has urged European leaders repeatedly to do more to stimulate growth, fearing contagion from the euro crisis that could hurt the U.S. economy and his chances of re-election in November.
New French President Francois Hollande is pressing for measures to boost growth rather than cut debt, Britain's David Cameron has become increasingly vocal in demanding Europe acts more decisively, Canada's Stephen Harper has been a frequent critic, and of the euro zone G8 members, Italian premier Mario Monti was calling for pro-growth policies before Hollande was.
That could leave Germany's Angela Merkel, who insists debt-cutting programmes cannot be diluted, cutting a lonely figure. - Reuters
Facebook set to begin trading
Facebook is about to find out just how much status updates, puppy photos and billions of “likes” are worth on Wall Street.
|||Facebook is about to find out just how much status updates, puppy photos and billions of “likes” are worth on Wall Street, with CEO Mark Zuckerberg ringing the Nasdaq Stock Market opening bell Friday morning from company headquarters a continent away.
Facebook's stock is set to begin trading on the Nasdaq a day after the world's definitive online social network raised $16
billion in an initial public offering that valued the company at $104 billion. That's more than Amazon.com and other well-known companies such as Kraft, Walt Disney and McDonald's. It's a big windfall for a company that began eight years ago with no way to make money.
Facebook priced its IPO at $38 per share on Thursday, at the top of expectations. Now, regular investors will have a chance to buy stock in Facebook for the first time. The stock will trade under ticker symbol will be FB.
Facebook has come to define social networking by getting 900
million people around the world to share everything from photos of their pets to their deepest thoughts.
It has done so while managing to become one of the few profitable Internet companies to go public recently. It had net income of $205 million in the first three months of 2012, on revenue of $1.06 billion. In all of 2011, it earned $1 billion, up from $606 million a year earlier. That's a far cry from 2007, when it posted a net loss of $138 million and revenue of $153 million.
“They could have gone public in 2009 at a much lower price,” said Nick Einhorn, research analyst at IPO investment advisory firm Renaissance Capital. “They waited as long as they could to go public, so it makes sense that it's a very large offering.”
Facebook Inc.'s valuation is the third-highest in an IPO, according to Dealogic, a provider of financial data. Only two Chinese banks, Agricultural Bank of China in 2010 and Industrial and Commercial Bank of China in 2006, have been worth more. They were worth $133 billion and $132 billion, respectively. By another measure -the amount raised-Facebook ranks third among U.S. IPOs. The largest was Visa, which raised $17.9 billion in 2008. No. 2 was Enel, a power company, and No. 4 was General Motors, according to Renaissance Capital.
The $38 share price is the price at which the investment banks arranging the offering will sell the stock to their clients. In an IPO, the banks buy the stock first from the company and the early investors and then sell to the public. If extra shares reserved to cover additional demand are sold as part of the transaction, Facebook and its early investors stand to reap as much as $18.4
billion.
For a company that was born in a Harvard dormitory and went on to reimagine online communication, the stock sale means more money to build on the features and services it offers users. It means an infusion of money to hire the best engineers to work at its sprawling California headquarters, or in New York City, where it opened an engineering office last year.
And it means early investors, who took a chance seeding the young social network with start-up funds six, seven and eight years ago, can reap big rewards. Peter Thiel, the venture capitalist who sits on Facebook's board of directors, invested $500,000 in the company in 2004. He's selling nearly 17 million of his shares in the IPO, which means he'll get some $640 million. He will hold on to about 28 million shares, worth $1.06 billion.
The offering values Facebook, whose 2011 revenue was $3.7
billion, at as much as $104 billion. The sky-high valuation has its sceptics, who worry about signs of a slowdown and Facebook's ability to grow in the mobile space when it was created with desktop computers in mind. Rival Google Inc., whose revenue stood at $38 billion last year, has a market capitalisation of $207
billion.
“There seems to be somewhat of a hype around the stock offering,” says Gartner analyst Brian Blau.
That may be an understatement.
Facebook's IPO dominated media coverage in the weeks and days leading up to the event. Zuckerberg's hoodie made headlines when he wore it to a meeting with investors as did General Motors' decision this week to stop advertising on the site -and rival Ford's affirmation that its Facebook ads have been effective.
There are more than a few reasons for the exuberance. First, there's Facebook's sheer size and high profile. The company grew from a college-only social network to an Internet phenomenon embraced by legions of people, from teenagers to grandmothers to pro-democracy activists in the Middle East.
Secondly, it's personal.
“It's probably one of the first times there has been an IPO where everyone sort of has a stake in the outcome,” Blau says. While most Facebook users won't see a penny from the offering, they are all intimately familiar with the company.
And then there's Zuckerberg, who turned 28 on Monday. He has emerged as the latest in a lineage of Silicon Valley prodigies who are alternately hailed for pushing the world in new directions and reviled for overstepping their bounds. He counted the late Apple CEO Steve Jobs among his mentors, and he became one of the world's youngest billionaires - at least on paper - well before Facebook went public. A dramatised and less-than-flattering version of Facebook's founding was the subject of a Hollywood movie that won three Academy Awards last year, propelling Zuckerberg even further into the public spotlight.
Though Zuckerberg is selling about 30 million shares, he will remain Facebook's largest shareholder. Even after the IPO, he will own 503.6 million shares, or 32 percent of Facebook's total shares. At the $38 share price, his stake in the company is worth $19.1
billion. Zuckerberg will control the company with 56 percent of its voting stock as a result of agreements he has with other shareholders who promise to vote his way.
The set-up helps to ensure that he and other executives keep control as the demands of Wall Street for short-term returns exert new pressures on the company. - Sapa-AP
Greece to dissolve parliament
Greece's day-old Parliament is set to be dissolved Friday to allow for new elections next month that are being cast as a decision on whether to keep the country in the 17-nation eurozone - even if that means accepting a deeply unpopular austerity program.
|||Greece's day-old Parliament is set to be dissolved Friday to allow for new elections next month that are being cast as a decision on whether to keep the country in the 17-nation eurozone - even if that means accepting a deeply unpopular austerity program.
Inconclusive elections on May 6 left squabbling politicians unable to form a government, deepening a political crisis and giving strength to radical parties that reject the terms of country's international bailout, without which it would default and have to drop out of the currency union with catastrophic financial consequences.
In a symbolic move Thursday, the 300 legislators elected May 6 were sworn in for just one day, including 21 lawmakers from the far-right Golden Dawn party. A caretaker government will lead Greece until the new election expected on June 17, but it can't make any binding decisions.
Such political paralysis comes at a critical time for Greece, which must make more budget cutbacks next month to get new funds from its international bailout, which has kept the country afloat since May 2010.
German Chancellor Angela Merkel spoke with Greek President Karolos Papoulias by telephone on Friday to underscore EU hopes that a government emerges from the June 17 poll with a strong mandate.
“We're awaiting the results of these elections and it's the wish of all European partners and the (German) government that a government capable of taking decisions in Greece should be formed as quickly as possible after the elections,” said Georg Steiner, Germany's deputy government spokesman.
With a government unable to make binding decisions until the elections, all eyes will be on Germany and other European leaders for signs that they will prove flexible in their demands for the new cuts next month and, more broadly, in Greece's bailout terms.
While Merkel has hinted that European economic policies could be supplemented with more growth-oriented measures, she has not signaled any willingness to significantly ease Athens' austerity plan.
The big winner from the May 6 election was the second-placed Radical Left Coalition, or Syriza, which capitalized on public discontent by promising to either toss out entirely or revise Greece's austerity commitments. It insists nevertheless that it wants to keep the country in the euro.
Opinion polls suggest the June 17 election will be a closely contested affair between Syriza and the two mainstream, pro-austerity parties that alternated in power for the past four decades and which have lost more than half their support.
JP Morgan Chase Bank analyst David Mackie raised the likelihood of a Greek euro exit from 20 percent to 50 percent if Syriza wins the elections and rejects the eurozone-imposed austerity measures outright. That could prompt Greece's creditors to withhold any further bailout funds and push the country into reverting back to its old currency, the Drachma.
Mackie said a Greek Eurozone exit would see the country's gross domestic product shrink by as much as 25-30 percent.
“If the direct effects of default were the only thing to worry about, a Greek exit would be manageable as far as the rest of the region is concerned,” said Mackie.
The biggest risk is that Greece's exit from the euro could destabilize other financially weak countries in Europe, causing their borrowing rates to rise as investors worry they may also eventually leave the currency union.
Even if Syriza does win there is a slight chance that Greece could stay in the eurozone, as long as it's willing to compromise, Mackie said.
“The key issue is whether there are terms of continued EMU membership that are acceptable to both sides. There will be an attempt to reach a compromise, which is possible if both sides are willing to concede some ground.”
The heightened uncertainty about which way Greek voters will go prompted Fitch ratings agency on Thursday to downgrade Greece to the lowest possible grade for a country that is not in default, warning of a “probable” Greek exit from the euro currency union if next month's poll results in an anti-bailout government.
In the streets of Athens, people expressed a mixture of apprehension over the future of the country and anger with politicians who let it come so far.
“For me, the political system needs to sit down and come to an understanding because they are killing our country, that is for sure,” said Athens resident Georgia, who didn't give her last name. “If they don't do it , our country will be lost.” - Sapa-AP
Facebook fever drives US stocks higher
US stocks opened higher Friday as investors awaited the historic market debut of Facebook, with Europe's financial crisis momentarily receding from view.
|||US stocks opened higher Friday as investors awaited the historic market debut of Facebook, with Europe's financial crisis momentarily receding from view.
In the first two minutes of trade, the Dow Jones Industrial Average jumped 47.38 points, or 0.38 percent, to 12,489.87.
The S&P 500-stock index climbed 5.52 (0.42 percent) to 1,310.38.
The tech-rich Nasdaq, where Facebook's shares will begin trading at about 11 am (17:00 SA time) rose 9.07 (0.32 percent) to 2,822.76.
“Investors keyed in on the market debut of Facebook. The social networking company was expected to raise up to $18.4 billion and become the first US company to be worth more than $100 billion at its debut, Wells Fargo Advisors said.
CEO Mark Zuckerberg, 28, wearing his trademark hoodie, rang the opening bell on the Nasdaq remotely from his company's headquarters in Menlo Park, California.
Priced at $38 per share, Facebook shares will trade under the symbol “FB” on the Nasdaq, giving the leading website a dizzying value of $104 billion at its initial public offering.
Facebook is raising $16 billion from the share offering, making it the richest IPO after financial giant Visa in 2008, according to Renaissance Capital. The addition of a possible stock “over-allotment” could boost the total to $18.4 billion. - Sapa-AFP
Syngenta bets on African expansion
Agrochemical and seeds giant Syngenta aims to boost its sales in Africa to 1 billion dollars within the next decade.
|||Agrochemical and seeds giant Syngenta aims to boost its sales in Africa to 1 billion dollars within the next decade, the firm said on Friday at its headquarters in Basel, Switzerland.
Syngenta said it planned to invest 500 million dollars in that period because it believed that the continent could become a major food exporter, and because of the huge local demand.
The group's sales in the Europe, Africa and Middle East region totalled 4.3 billion dollars last year. Syngenta did not provide the latest figures for Africa alone.
The company said it wants to work with local partners and experts to boost both small-scale and large-scale agriculture.
Swiss corporate watchdog groups and environmental activists had nominated Syngenta for this year's Public Eye Award for the world's most unethical company. They accused the firm of marketing potentially hazardous herbicides in developing countries that are banned in Europe. - Sapa-dpa
Gordhan: youth wage subsidy talks urgent
Finance Minister Pravin Gordhan called for urgency in discussions on the youth wage subsidy.
|||Finance Minister Pravin Gordhan on Friday called for urgency in discussions on the youth wage subsidy, saying the problem of creating jobs for young people cannot be indefinitely deferred.
A broad range of measures were needed to make progress in expanding employment and alleviating the special problem of youth unemployment, he told the National Assembly during debate on his budget vote.
These included measures aimed at stronger investment and growth through the infrastructure build programme and economic support package, and addressing skills constraints in the economy through measures to improve access to and the quality of basic, further, and higher education.
Tailored employment policies including the community work programme, environmental sector public work programmes, and the national rural youth service corps received additional allocations in February’s budget and would help boost youth and overall employment in the short-term, he said.
There had been a number of concerns raised with the proposed youth employment incentive. Discussions with social partners were aimed at mitigating these concerns.
The rules, design, and monitoring of a youth employment incentive needed to ensure that it did not have negative unintended consequences, including potential displacement of existing jobs.
“We would like to see these issues addressed fully in discussion between social partners at Nedlac (National Economic Development and Labour Council), but with urgency, as the challenge of creating jobs for young people cannot be indefinitely deferred,” Gordhan said.
Data from the Quarterly Labour Force Survey showed overall employment decreased by 75,000 in the first quarter of 2012.
Employment fell across all age groups, with job shedding most severe among those aged 25 to 34 years old (31,000, quarter to quarter), 35 to 45 years (22,000 q/q), and 55 to 64 years (21,000 q/q).
Employment for all age groups (except those aged 35 to 44) remained below the pre-crisis level, although young people aged 15
to 24 years continued to be worst affected (360,000 or 20 percent below 2008 levels), Gordhan said. - Reuters